Exchange puts watch on BT: Market monitors dealing in shares to ensure orderly run-up to pounds 5bn offer

INVESTORS who buy or sell more than 100,000 BT shares in the next four weeks will have the details of the trade passed to the London Stock Exchange in a bid to ensure an orderly market in the run-up to the pounds 5bn share offer.

The announcement came as the exchange confirmed that it had turned down the request by SG Warburg for all dealings in BT to be for cash settlement. The exchange had initially supported the request but backed down in the face of opposition from market- makers and investors, who were concerned that Warburg was trying to rig the market.

The exchange is asking all market- makers to report the size, price and time of large BT deals to its market supervision department by the close of business each day. The information will be kept confidential.

The move was partly inspired by complaints of market manipulation after the pounds 2.1bn Wellcome share offer last year. The drug company's share price fell from 1,113p to 800p in the three months after the sale was announced, underperforming the market and its peers by more than a fifth.

The complaints were investigated but no evidence of wrongdoing was found. The investigations were, however, hampered by the difficulty in getting prompt information about share trades.

'We wanted to make it entirely clear to the market and market-makers that we will be monitoring dealing very closely indeed. So we wanted to be able to monitor on a daily basis rather than retrospectively, as with Wellcome,' a spokeswoman said.

She added that the exchange had been considering its monitoring arrangements since the Wellcome offer and the reporting requirement would have been introduced regardless of Warburg's request. Similar rules will be introduced on other offers 'where the size makes it appropriate'.

The rejection of mandatory cash settlement was welcomed by market- makers and institutions, although some were still unhappy about the reporting arrangements. John Thomson, a senior investment manager with Standard Life - who was strongly opposed to cash settlement - said: 'It is better but still not perfect. Any manipulation in the market is unacceptable, but this is clearly better than cash settlement.'

A market-maker involved in the issue, who preferred not to be identified, said: 'It will be time-consuming, but I am quite happy that it is an acceptable solution.'

Warburg had wanted cash settlement to help it to identify investors who added to their holdings during the offer period, so qualifying for preferential allocation. Maurice Thomson, who is handling the issue for Warburg, said: 'We will have to apply the allocation criteria by other means. That's fine.'